As you are probably aware, regarding investments, we had a fantastic 2019. The Dow Jones Industrial Average was up over 25%, and the S&P 500 was even better, over 31%. Internationally, developed country stocks were up 22%, and even bonds did well with the Barclay’s Aggregate Bond Index returning nearly 9%. So, unless you were making hefty withdrawals, your portfolio likely saw unusually good returns last year overall.
So, what does 2020 have in store for us? Here are some FAQs for you:
- Will the market fall after a big up year like 2019? We certainly should not get used to the type of returns we had last year, but remember that last year made up for the losses we saw in 2018 (and 2015). But, that doesn’t mean anything going forward. Over the long run, stocks are the best place to be, so a portion of your long-term money (the money that we invest) should absolutely stay invested in the stock market. However, everyone’s risk tolerance and situation is different, and we are happy to discuss this with you.
- Is a recession coming this year? Maybe; maybe not. A recession is always looming (occurring, on average, every 3.5 years), and that’s just part of long-term investing: staying diversified, rebalancing, and thinking long term.
- Are we about to be in another war? Who knows. What we do know is that it is always a bad time to invest (click here for a graphic to prove this), and, as such, it’s always a good time to invest. Stay invested, stay diversified, and ensure you are invested to your own personal risk tolerance (I realize I am sounding repetitive).
- We have a presidential election this year; what does that mean? Technically, nothing, but if you want to look at trends, the 3rd year of a president’s term tends to have the highest market returns, followed by the 4th. Past results don’t guarantee future performance, but if that trend continues, this would be a good year (I don’t, by the way, feel there is any correlation between the market and election years, but I just wanted to point it out in case you were wondering).
In closing, staying the course may not sound dynamic or exciting, but we do believe that is the most sound advice in light of all the factors mentioned above, and based upon the forward-looking data. As always, we will modify our positions if we find circumstances warrant a change.